How The Beatles' Streaming Marks a Turning Point for Digital Music

The Fab Four's decision to embrace streaming has put Adele and Taylor Swift on the outside looking in.

As the business of streaming has been either attacked or ignored by some of today's most popular stars, the biggest act of all time has finally embraced the format. It's not an overstatement to say The Beatles will change digital music when the group's music joins at a host of streaming services Thursday. What's more, now it feels like Taylor Swift and Adele are on the outside looking in.

The Fab Four's catalog will be available at Spotify, Apple Music, Rhapsody (and Napster in the U.K.), Deezer, Google Play Music, Tidal, Microsoft Groove and Slacker. It has already — and quietly, it seems — been available at Pandora, SiriusXM Radio and other non-interactive services both online and terrestrial that do not need permission to play a recording.

The question is why?

Financial motivation often leads artists' decisions about streaming services. Swift has boycotted Spotify because she believes the ad-supported service and its unlimited free listening doesn't value music properly. Other artists have sought compensation in return for an exclusive window at a streaming service. But financial reasons seem relatively unimportant in this case. Subscription services could possibly pay The Beatles less than a few syncs in major motion pictures or television commercials in 2016.

Another critical aspect of The Beatles' streaming debut is cultural. Subscription services have reached a tipping point with this announcement. This longtime digital holdout, from a company that aggressively defends that value of its intellectual property (recall the lawsuit against Apple Computer by the Beatles' label, Apple Records), has given its imprimatur to a young, often struggling and — in the case of Spotify — criticized business model.

Perhaps they didn't want to feel left out. A source familiar with the negotiations believes the surviving Beatles and the heirs of John Lennon and George Harrison were influenced by the decisions by Led Zeppelin and AC/DC to allow their recordings to be streamed at on-demand services. It's a plausible explanation that captures a human motivation. After all, if two of the greatest rock catalogs were made available, why shouldn't recordings four to five decades old be available to hundreds of millions of listeners around the world?

The Beatles' timing is better this time around. The group's music was arguably kept off download stores too long. Its exclusive launch at iTunes started in November 2010, only two years before the overall peak of download sales in the U.S. Now The Beatles are joining subscription services that are still in their early stages. They'll be involved in the growth of these companies. They'll be in listeners' playlists, and these services' own playlists, just as the playlist becomes the hard currency of the streaming era.

The timing is also good for streaming services. Outside of a new Beatles item, how else are Tidal, Rhapsody, Google Play Music and others (not named Spotify or Apple Music) going to be mentioned everywhere from global and national news outlets to local drive-time radio news broadcasts? And just days before new mobile devices will be unwrapped? Awareness of subscription services must increase for subscription services to reach the mainstream. The Beatles bring awareness.

Of course, old catalogs are different than new catalogs. A new artist may view streaming royalties differently than an artist who generates money from an old catalog. About 70 percent of rock streams are catalog tracks, according to Nielsen Music. A developing artist doesn't have a popular catalog that will generate a predictable stream of royalties. Labels and their new artists need royalties sooner than later. Purchases are better than streaming at generating royalties quickly. Adele has hinted at this problem. In explaining her decision to keep 25 off subscription services, she said she buys physical CDs to make up for those that don’t.

Young and developing artists will need to figure out how to use subscription services to their advances. Regardless of the size of the royalty being paid, they'll have to work within this new structure. Swift and Adele should be saluted for pushing back at services and representing those artists without a voice. But the number of artists that can afford to reject some or all subscription services could be counted on one hand. Maybe two.

The takeaway here is subscription services have turned a corner — maybe not financially and maybe not politically, but at least culturally. The Beatles have given subscription services a legitimacy no young artist could offer. Consumers will feel the difference and, if all goes as planned, might pay something for it.

The other holes in streaming services don't carry the same weight as the hole The Beatles had left until Thursday. Led Zeppelin came close. AC/DC was another major holdout. The still-resistant Garth Brooks, who started selling downloads just last year, would be a huge addition, although country music doesn't travel to other markets as well as The Beatles catalog. As would alternative-metal band Tool, who also continues to oppose streaming.

Absent Swift's catalog and Adele's 25 (although they have the latter's hit single, "Hello"), subscription services should ride this momentum. The Beatles give them a valuable talking point with middle-aged consumers that are less likely than younger demographics to use subscription services (although the former have far more disposable income). They can honestly say, "We have everything you want" — unless, of course, middle-aged consumers also want a few current pop hits and Swift and Brooks' country albums. At the very least, they can tell consumers, "We've finally arrived."